Plasan comes down to earth

After a long period of growth, the kibbutz-based vehicle protection company, whose products are a hit with the US military, finds itself laying off employees.

Figures presented by the Kibbutz Industries Association today at its annual gathering indicate a fall of more than 13% in the aggregate operating profit of kibbutz enterprises in 2011.

A substantial part of the fall is attributable to what a year ago was considered the brightest shining star of kibbutz-based industry: Plasan, of Kibbutz Sasa in the Upper Galilee, which produces vehicle protection kits and accessories that have become a hit with the US military.

For several months now, senior defense industry managers and defense establishment officials have had the feeling that Plasan is starting to come back down to earth, after years of steeply rising sales and profits. Since 2002, Plasan's sales have consistently risen year after year, and in 2010, even the most cynical had to rub their eyes when they saw a sales figure of over 850 million.

The survivability of Plasan's armored vehicles, designed on the basis of the concept that vehicles should be built around the soldier, to ensure him maximum comfort despite the extensive armor, appealed to the US Army, which turned the company into a serial contract winner.

The orders flowed. Plasan worked long and hard, and the small kibbutz near the northern border quickly began to benefit from the profits. The kibbutz members were taken on by the factory, which employed over 1,000 people. The residents went on joint overseas trips, their homes were renovated and extended, and members of other kibbutzim looked on enviously.

Management with vision

Plasan is owned by Kibbutz Sasa, which has remained a collective and has not undergone privatization. The CEO of the enterprise is kibbutz member Dan Ziv, and many attribute Plasan's success in recent years to his management, which is characterized by vision, creativity, and daring.

As a private company, Plasan does not publish its profits and losses, but its managers admit that this year's performance will not be a continuation of the growth trend.

The upcoming withdrawal of the US military from Iraq, the attempt to thin out the US military presence in the Gulf and elsewhere, the global economic crisis, forcing governments to cut defense budgets, all these factors have their effect on Plasan's production lines.

In recent months, the atmosphere at the factory has undergone a change, and many workers have received dismissal letters. Plasan will not provide exact figures, but sources involved in the matter put the number of layoffs at 100-150.

The situation at Plasan has had an impact on the company's subcontractors as well. A source familiar with the situation mentioned layoffs of at least 20 workers from a factory that supplies components to Plasan.

"Orders have fallen off sharply in the past year. There's no doubt that the Plasan of 2011 is not the Plasan of 2010. It's as though they are two entirely different companies. It was clear to Plasan's management that wars tend to come to an end; that's something they could have prepared for," a senior defense industry source told "Globes".

The situation isn't so dramatic

At Plasan, talking privately, they claim that "the situation isn't as dramatic as it looks from the outside," but confirm that, last year, the company completed an unprecedented armor project for the US Marines, and say that at the end of such an extensive contract, a decline in the volume of activity is only natural.

"It's impossible to maintain a huge volume of activity for ever. When there's a decline in activity, there's also a declining need for such a large workforce. The bottom line is that the need for vehicle protection won't disappear all that fast, certainly not in a period when the terrorism threat is on the rise."

Published by Globes [online], Israel business news - www.globes-online.com - on December 1, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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